The Difference Between Bi-Weekly and Semi-Monthly Pay

Online payroll for small business makes it easier than ever for companies without a dedicated payroll department to manage and process payroll efficiently. In fact, contracting out payroll is now so common that it is getting harder and harder to find small businesses that still do things themselves. Be that as it may, there are decisions that have to be made when signing up for payroll services. One of them is the frequency of pay.

You could make the argument that the most common pay frequency model in the U.S. is bi-weekly pay. Processing payroll bi-weekly is more efficient than doing it every week, and employees benefit from a routine schedule that doesn't change. There is another option, however: semi-monthly pay.

Bi-weekly and semi-monthly pay offer similar benefits to employers and payroll providers. However, they are not the same thing. Employers need to know the differences before they choose an option for their workers.

Bi-Weekly Pay Schedule

A bi-weekly pay schedule works just as its name suggests. Employees are paid every other week on the same day, typically Thursday or Friday for most employers. Keeping payday later in the week gives HR workers ample time to correctly enter payroll information into the in-house or online system.

The main benefit of bi-weekly pay is the static schedule. Employees know that they will be paid every other week, on the same day, for as long as they work for that company. There are never any questions. This certainly makes for easier budgeting in that employees always know what to expect.

The main downside is that bi-weekly pay does not follow calendar dates. This means a little bit more hassle for the employer who is budgeting and expenditures are tied to certain dates. It's not too big a deal, but some employers prefer to tie payroll to specific calendar dates. That's what a semi-monthly pay schedule is for.

Semi-Monthly Pay Schedule

Under the semi-monthly model, employees are paid twice per month regardless of how calendar dates fall between weeks. As an example, an employer may determine that the first monthly pay schedule runs from the 1st through the 15th while the second runs from the 16th through the end of the month. Payroll is processed, and wages paid two or three days after the conclusion of the pay period.

Although this may not seem all that different from bi-weekly pay on the surface, there is one major difference employees need to be aware of: instead of receiving 26 paychecks per year they will receive 24. Each of those paychecks will be slightly higher to accommodate receiving two fewer checks.

Employers who prefer the semi-monthly model like the fact that they only need to pay attention to calendar dates for accounting purposes. This makes their own budgeting somewhat easier.

Determining Company Pay Schedule

Once an employer understands the difference between bi-weekly and semi-monthly pay, a decision must be made based on the best interests of everyone involved. Choosing a schedule based only on what is best for the employer may backfire if workers are unhappy enough to look for work elsewhere. On the other hand, basing the decision solely on what workers want could be harmful to the bottom line. If neither model works, there are other options.

Companies offering payroll services can detail the pros and cons of both pay schedules for their clients. We do that here at BenefitMall. One of our goals is to make sure each of our clients is doing what is best for their businesses and workers so that everyone benefits on payday.